Protesters try to break down the gate of the parliament during a protest against the government plans to raise fuel price in Jakarta
Leading Indonesian political parties on Friday rejected a government plan to raise fuel prices unless crude oil prices climb further, dealing a blow to the ruling party's efforts to control a swelling budget deficit.
Indonesia has the lowest fuel prices in Asia. The government wants a 33 percent rise from April 1 to reduce subsidy costs that threaten to undermine the budget discipline that led rating agencies to lift Southeast Asia's largest economy to investment grade status.
According to Reuters, in the early evening, police fired tear gas grenades and used water cannon against thousands of demonstrators who rallied outside parliament to oppose a price rise, a Reuters witness said. There was no immediate word on casualties.
Earlier, other protesters blocked access to the toll road connecting Jakarta and its main airport.
President Susilo Bambang Yudhoyono's Democrat Party wants to change the law to allow a price increase if the Indonesia Crude Price (ICP), a basket of crude oil prices, rises to average more than five percent above a budget forecast for $105 a barrel. The price is currently 10 percent above that, at $116 a barrel.
But the Golkar Party, part of the ruling coalition and with the second largest number of seats in parliament, said on Friday it rejected a fuel price hike and would only support it if the ICP rose 15 percent above the budget forecast.
Golkar previously supported the fuel price hike but changed its mind after a week of protests across the country.
"At the beginning of this debate, Golkar was leaning to understanding the government's stance. But when the people demanded, shouted and reminded us that Golkar is a party of the people, we of course reassessed our position," said Ahmadi Noor Supit, a Golkar lawmaker.
Protests over a fuel price hike helped spell the end for autocratic leader Suharto in 1998 and lifting prices would hurt the bulk of the country's 240 million people, many of whom live on a few dollars a day despite years of strong economic growth.
"The latest manoeuvre by Golkar is a smart calculation ... this rejection of the fuel price hike could boost support for Golkar," said Syamsuddin Haris, a political analyst from Indonesia's Institute of Sciences.